Lecture Notes for

Advanced Financial Management

Course Outline, How to Study for This Paper, Assessments

Teaching staff: Marco Eugster, Helen Lu & Karis Wang

Topic 1 Introduction Notes 1.1

The University of Auckland

1
Contents

1 Course Introduction 3

2 What Advanced Financial Management Covers? 4

3 How to Study this Paper? 6

4 Books and Reading Materials 8

5 Assessments 9

6 Bios of Teaching Staff 10

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1 Course Introduction
• Objective of Course
– Develop a logical and consistent framework for solving corporate finance
problems
– Apply fundamental concepts of finance to practical corporate finance
problems
• Why do we emphasize coherence?
– Corporate finance decisions are rarely “stand-alone” decisions
◦ Marketing: estimating the “additional” revenue from launching a new
drink (Coke Zero)
◦ Strategy: predicting competitor’s response to a price cut (price war
or differentiation? Low-cost airlines)
◦ Operations: forecasting cost-saving after an acquisition or a merger
– Financing decisions often interact with investment decisions.

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2 What Advanced Financial Management Cov-
ers?

• Part 0: The background: Firms and financial markets (Topic 1, by Dr

Helen Lu)
• Part I: Valuation and the capital budgeting decision: how to make the
“pie” larger
– Traditional valuation methods
◦ DCF and comparable company multiples (Topic 2, by Karis Wang)
◦ Which discount rate to use? (Topic 3, by Dr Marco Eugster)
– Cross-border valuation (Topic 4, by Dr Marco Eugster)
◦ Exchange rates and basic parity relations
◦ Cross-border valuation

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 What Advanced Financial Management Covers? (cont.)

• Part II: Financing decisions

– Capital structure policy (Topic 5, by Dr Marco Eugster)
– Payout policy (Topic 6, by Dr Marco Eugster)
– Raising equity capital (Topic 7, by Dr Helen Lu)
– M&A (Topic 8, by Dr Helen Lu)

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3 How to Study this Paper?

• Spend 2-3 hours to prepare before each live interactive

session:
– Watch the prescribed video clips
– Attempt quiz questions
– Read prescribed book chapters
• Participate in all interactive sessions:
– There are two face-to-face sessions each week during scheduled class
time (if we are allowed on campus)
– In addition, there will be zoom sessions for those who cannot be on
campus (please read the weekly organisational email carefully for the
time and the zoom link)
– Each session provides a 5-10 minute summary from the teacher, Q&A
time, extension through a mini-case or discussion of a current event
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 How to Study this Paper? (cont.)

– These sessions will not be recorded

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4 Books and Reading Materials

• Prescribed textbook: Corporate Finance (5th edition) by Berk and De-

Marzo
• Additional reading materials (optional): to be provided in live interactive
sessions

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5 Assessments

Table 1: Assessment
Assessment Percentage Due Date
Assignment one (individual) 10% Aug 19 (23:59)
Mid-term quiz (online, 1.5 hours) 35% Sep 14 (Online, during class time)
Assignment two (individual) 10% Sep 30 (23:59)
Quizzes 5%* 23:59, before the lecture day
Final exam (online, 2 hours) 40% TBA
*0.5 mark for completing one quiz on time, with the total marks capped at 5

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6 Bios of Teaching Staff

Karis Wang
BA/BCom (Auckland)
• Karis has designed tutorial materials and delivered classes for many third-
year finance papers and the MBA programme at the University of Auckland
since 2009. She is the CFA Program liaison and the co-faculty advisor
for the CFA Institute Research Challenge at the University of Auckland.
She has published research papers on regulations of New Zealand capital
markets. Karis previously worked in Russell Investment New Zealand before
joining the University.

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 Bios of Teaching Staff (cont.)

Dr Marco Eugster
BA/BCom (Auckland), BCom(Hons) (Auckland), PhD (Auckland)
• After earning his PhD in Finance, Marco worked in consulting for sev-
eral years. He has held roles with KPMG in Germany and with PwC in
Auckland in the Finance and Economics team. He has been involved with
projects in areas including cost of capital, financial modelling, cost-benefit
analysis, regulated industries and infrastructure economics. Marco is a
CFA charterholder. He has been teaching finance courses at the University
of Auckland for several years, including for the BCom(Hons) and MBA
programmes.

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 Bios of Teaching Staff (cont.)

Dr. Helen Lu
BEng (Northern Jiaotong), MEcon (Peking), MBA (London), PhD (Massey)
• Helen Lu joined the University of Auckland in January 2014. Her primary
research areas are empirical asset pricing and valuation. She is interested
in issues related to applications of machine learning techniques to finance,
recent advances in FinTech, and financial impacts of climate risks. Helen
worked in investment banking at Credit Suisse and Deutsche Bank prior
to her PhD.

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